Mass debt forgiveness for homeowners would end in banks needing another taxpayer-funded bailout, AIB director Michael Somers (pictured) told members of the Oireachtas Finance Committee.

State-appointed directors on the boards of Bank of Ireland and AIB were questioned by TDs and senators in an often tense session yesterday.

Resistance to debt cancelation is setting bailed-out banks on a collision course with politicians of all parties, including the government, which has introduced new insolvency laws to help cancel unsustainable debt.

Writing off debts is a challenge for the banks, Mr Somers said, and he ruled out mass debt forgiveness.

"There's an awful lot of chancers who would be only too happy to have their mortgage written down," he said.

Mr Somers is a retired civil servant and former head of the National Treasury Management Agency (NTMA).

He then became one of the directors sent in to monitor bailed-out banks on behalf of taxpayers.

If AIB engaged in mass debt write-offs, some undeserving case would benefit and be publicised," he told TDs.

"We would be hung out to dry on it," he added.

However, in a rare indication of conflict between the director and management at the bank he oversees, Mr Somers did share a concern about the lack of lending by AIB.

"I am not particularly proud of the amount lent to small and medium enterprises," he said, confirming that €600m in new loans to small business have been made this year.

Mr Somers was one of four "public interest" directors from AIB and Bank of Ireland questioned yesterday.

The others were the former Labour Party leader Dick Spring, also at AIB, former Fianna Fail minister Joe Walsh and his colleague at Bank of Ireland, Tom Considine, a retired head of the Department of Finance.

The Bank of Ireland directors came in for very sharp criticism from committee members.

The atmosphere darkened in particular when Joe Walsh declined to answer questions about whether he had made any effort to prevent payment of €66m in bonuses to staff at Bank of Ireland after the lender had been bailed out. The bank was later fined over the matter.

Mr Walsh said he considered himself answerable to the Minister for Finance in his role as public interest director. But he admitted that he had not reported back to the minister in four years at the bank.